Exiting student landlords have paved the way for PBSA developers charging higher rents, according to The FT.

UCAS data points to a continuing accommodation crisis in the sector, with university applications still 6% above pre-Covid levels, but with an estimated reduction of 100,000-150,000 beds for students to rent in shared houses since 2021.

Higher interest rates and more regulation are pushing small-scale landlords to quit while councils such as Nottingham have announced plans to get more students living in purpose-built student accommodation.

Investors such as Unite Group see an opportunity, and last month, the firm – which provides homes to 70,000 students across 157 properties - raised £450 million to develop and buy more student accommodation. However, it says new supply of PBSA is 60% lower than pre-pandemic levels.

LandlordZONE has previously reported that fewer than 17,500 new purpose-built student beds are expected to be added in the coming academic year, representing 0.6% growth.

Knight Frank’s UK Student Housing Market Update reveals that only 258,000 new PBSA beds have been added to supply over the last decade.

Crisis

The FT reports: “On the one hand, the crisis has enabled landlords to push up rents. Unite is forecasting a 7% increase in rents in its 2024-25 fiscal year. Higher rental prices helped drive a 14% increase in its half year adjusted earnings to £125.3 million

“That sounds like easy money. But construction costs have also jumped in recent years, even if inflation is now softening. Construction costs are currently north of £100,000 per en suite room in a private purpose-built student block, says David Feeney a partner at Cushman & Wakefield.”

To make developments worthwhile, he reckons companies need to achieve weekly rents of about £230 for an en suite room, which is tough in many towns and cities.

Main image credit: Unite Bristol